Pillars on a Government building

Here’s what you should know about this week on the Hill: July is going to be a busy month on the legislative front, with the primary focus on passing a slimmed down version of the Build Back Better Act and the semiconductor manufacturing package.  

So, What Exactly Are We Building Back Better?

Congress is adjourned until July 12, but once they’re back in session, things are going to get busy on the legislative front since Democrats will want to move forward as many bills as possible before heading home for the August recess and the campaign trail for midterm elections.

So, let’s talk about what everyone is skeptically still waiting for: what legislative package is going to replace the Build Back Better Act? 

  • The clock is running out for Democrats on getting a reconciliation bill passed. Procedurally, Democrats have until September 30—when the budget resolution expires—to pass a budget reconciliation bill. With the August recess and the midterm elections, this leaves July as the primary working month on the Hill. Not to complicate matters, but both chambers will officially only be in session for 12 days in July.
    • This was the vehicle the Democrats wanted to use to pass the Build Back Better Act. But then it all fell apart at the end of last year. Rumor has it that Senate Majority Leader Chuck Schumer and Sen. Joe Manchin have been meeting privately to negotiate a slimmed down version of the Build Back Better Act, which is expected to primarily focus on energy and climate provisions, tax increases for corporations, and drug prescription pricing.
  • Now Democrats want to also include healthcare policy in this package. Here’s why: 
    • The American Rescue Plan Act of 2021 enhanced and expanded access to health insurance under the Affordable Care Act by lowering premiums and expanding eligibility. 

    • If Congress doesn’t act, these tax subsidies expire at the end of this year, and millions of Americans could see their healthcare premium costs increase in 2023. As such, Democrats want to address this issue in whatever bill ends up going through the reconciliation process. 

    • Slight obstacle though: Manchin said to table this issue until “other core issues are settled” in negotiating a slimmed down version of the Build Back Better Act. And since he’s the hold up on getting a reconciliation bill passed in the Senate, this makes things a bit complicated.

    • Extending these subsidies could also be expensive. The CBO estimates it could cost as much as $220 billion over a decade.

  • A group of House Democrats from high-tax states continue to insist they won’t sign on to any reconciliation deal that doesn’t include SALT cap relief. This is another hurdle Democrats will need to overcome to get the votes needed to pass a reconciliation bill.
  • The proposed $4,500 electric vehicle tax credit is no longer on the negotiation table for the reconciliation bill. This credit would have been in addition to the existing $7,500 credit. 

The Little Pot Bill That Could

Negotiations continue as a conference committee of House and Senate members work to reconcile the differences between its two versions of the semiconductor/domestic manufacturing bills to get this passed by the August recess. The House version of the bill (America COMPETES Act of 2022) included the SAFE Banking Act, which would allow access to banking services for cannabis businesses operating in states where marijuana sales are legal by exempting financial institutions from federal investigation or prosecution for providing those services.

  • This is a bill that has bipartisan support and some version of it has passed in the House six times over the past two Congresses. Tacking the bill onto a bigger legislative package like this gave it hope once again, but now it appears the bill is being dropped from the manufacturing package. 

  • Nonetheless, the bill’s supporters will continue to push for its passage in some shape or form, even if it doesn’t make it into this semiconductor bill. Because, according to Rep. Ed Perlmutter, “By excluding the #SAFEBankingAct from the #USICA/#COMPETES bill, the Senate continues to ignore the public safety risk of forcing cannabis businesses to deal in all cash. In the wake of the Senate’s inaction, people continue to be killed and businesses continue to be robbed.”

In Case You Missed It 

  • The U.S. Supreme Court has agreed to hear a case on whether a “violation” under the Bank Secrecy Act is the failure to file an annual FBAR (a report of balances over $10,000 in foreign accounts) no matter the number of foreign accounts, or whether there is a separate violation for each individual account that was not properly reported. Federal appeals courts are divided on this issue, so it is up to the Supreme Court to be the tie breaker. 
  • A group of Republicans in the House wrote a letter to Treasury requesting a delay for implementing the new foreign tax credit regulations and asking the department to issue clarifying guidance.
  • Per Rev. Proc. 2022-28, the IRS will no longer issue letter rulings on whether a spin-off/termination transaction that involves excess assets results in an employer reversion under Sec. 4980(c)(2).
  • The IRS is assembling a new task force to focus on potentially abusive transactions. The Joint Strategic Emerging Issues Team will include employees from multiple operating divisions within the IRS and the chief counsel offices to bring together various skill sets and expertise to address emerging tax administration issues.
  • The National Taxpayer Advocate issued a mid-year report to Congress, addressing the IRS’ continued delays in processing paper-filed tax returns. At the end of May, the IRS had a backlog of 21.3 million unprocessed paper tax returns, which is 1.3 million more than this time last year.

This newsletter features developing content that is subject to change at any time. It does not constitute legal or tax advice. Consult your professional advisors prior to acting on the information set forth herein. 

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